NBFC education loan expected to rise
NBFC education loan expected to rise amid higher demand for studying in abroad
Over the years the demand for pursuing higher education in abroad . With the rise in numbers , the education loan asset under management (AUM) of Non-banking financial companies (NBFCs) is expected to grow at 40-45 per cent and would cross Rs60,000 crore in this fiscal year. The data is according to the report mentioned on September 2,2024.
In the year 2023 and 2024 , the growth was upto 80 per cent and 70 per cent respectively. The NBFCs' education loan AUM has increased to Rs 43,000 crore as on March 31,2024. The report by CRISIL ratings stated so.
Indian students studying abroad has almost doubled in the past five years , it has rose upto 13.4 lakh as of last fiscal year.The CRISIL rating director , Ajit Velonie while addressing said "Only a tenth are being funded by these NBFCs, and even including education loans by banks, the financed quantum is not much higher,"
This can be analysed as a big portion of overseas education is being funded through other means. It includes informal financing, self-funding, or perhaps other forms of loan.
"That shows education loan companies have significant headroom for growth. Rising ticket sizes because of ascending tuition fees, inflation and living expenses are also tailwinds," Velonie added.
According to the report, a strong micro-market intelligence and fast turnaround times have made it possible for NBFCs to carve out a niche in the education loans space.
The Director, CRISIL Ratings, Malvika Bhotika said that additionally, prepayment and foreclosure rates are high as 35-45 per cent of the loans get prepaid during the initial moratorium period of typically three years.
"Most of the loans are repaid in 5-7 years even where the contractual tenure is higher. However, given the recent high growth, around 90 per cent of the portfolio is currently under moratorium. So, asset quality performance over the longer term remains to be seen," added Bhotika.
Education loans, are basically to fund courses overseas, will continue to be in the fastest-growing segments for NBFCs .
The rise in demand for higher education abroad and increasing tuition fees, inflation, and living expenses are driving the growth in education loan assets under management (AUM) for NBFCs.
As of March 31, 2024, the AUM for education loans provided by NBFCs has reached Rs 43,000 crore. This is expected to grow by 40-45% and cross Rs 60,000 crore in the fiscal year.
The number of Indian students studying abroad has nearly doubled, rising to 13.4 lakh as of the last fiscal year.
CRISIL Ratings indicates that only a small fraction of students studying abroad are funded by NBFCs and banks. The majority of education financing comes from other sources such as informal financing or self-funding.
High prepayment and foreclosure rates during the initial moratorium period and the fact that 90% of the portfolio is currently under moratorium present challenges. The long-term asset quality performance remains uncertain and will need to be evaluated as the loans mature.
